Personal Injury Settlements in Maryland: What Portion Is Marital Property?

The Maryland Court of Special Appeals addressed last week an issue that our personal injury clients in malpractice and accident cases have occasionally expressed: is my settlement or verdict my money or marital money I have to share with my spouse?

In Murray v. Murray, the court was faced with, ironically I guess, a lawyer who had reached a settlement after filing a lawsuit against her former law firm alleging that the firm engaged in discriminatory and retaliatory practices in firing her. (I would have been interested in learning more about the underlying lawsuit.) You know the rest of the story. The settlement came after she and her husband were separated but before they were divorced and the lawyer spouse wanted all of the money for herself.

The Maryland Court of Special Appeals found that the portion of a settlement that compensates a claimant spouse for lost wages or earning capacity during the marriage, medical expenses paid from marital funds, or for joint loss of consortium, is marital property subject to equitable distribution. Pain and suffering damages are not marital property.

This is an easy enough rule to formulate but there is a problem in its application. Personal injury settlements do not allocate between economic and non-economic damages. This issue is one that personal injury lawyers frequently tackle in a variety of contexts, most notably, in dealing with medical liens. How much of the settlement was for medical bills? The insurance company does not (and cannot) delineate.

The Maryland rule the court underscored in Murray is that it is for the finder of fact to determine how the settlement should be apportioned. Interestingly, the trial court rebuked the Montgomery County trial judge who found that the husband in this case did not prove any of the property at issue should be classified as martial property:

In its Opinion and Order, the court found that the settlement agreement did not
“delineate what the $550,000 represents, other than a settlement.” Ironically, it blamed
[Defendant] for failing to carry his “burden to identify and value the [proceeds] he seeks to classify as marital,” concluding “there simply is no credible evidence from which the court can conclude that this sum is marital.” [Defendant] complains that his cross-examination into the status of the settlement funds was unduly restricted. We agree.

The take home message for Maryland personal injury lawyers advising clients is that you cannot give them a definitive answer as to how much their spouse will get out of their settlement. But you can tell them that the spouse gets half of any part of a settlement that is determined to be for (1) present or future lost wages that were incurred during the marriage, (2) medical bills, and (3) joint loss of consortium. The plaintiff spouse does get to keep their own pain and suffering damages, which should be the largest portion of most personal injury settlements. How to apportion what part of a settlement falls into what category is a subject of argument until it gets to a finder of fact who is required to engage in the difficult task of apportioning the settlement.

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